Power company puts carbon capture project on hold

American Electric Power Co. said Thursday it was putting a hold on its plans for a commercial-scale carbon dioxide capture and storage project in West Virginia because of uncertainty surrounding...

COLUMBUS, Ohio – American Electric Power Co. said Thursday it was putting a hold on its plans for a commercial-scale carbon dioxide capture and storage project in West Virginia because of uncertainty surrounding U.S. climate policy and what the company described as a weak economy.

Michael G. Morris, AEP's chairman and chief executive said continuing to build the system at the utility's coal-fired Mountaineer power plant in New Haven, W.Va., no longer makes economic sense.

"We are placing the project on hold until economic and policy conditions create a viable path forward," Morris said in a statement.

Electricity demand is sluggish for AEP and other utilities across the country. Also, electricity prices have been kept low both by lower demand and by low natural gas prices, which often set the price for wholesale power.

Low power prices make it more difficult for companies to earn a profit on new generating plants. While the utility industry and policymakers are still examining just how costly it is to capture and store carbon dioxide from power plant emissions, there is no question that it will be expensive. The equipment used to remove carbon dioxide siphons away half or more of the power produced by the plant, depending on how much carbon is to be removed.

Carbon dioxide is the most important greenhouse gas, scientists say. Coal, which is used to generate about half of the electricity consumed in the U.S., is responsible for 34 percent of the nation's greenhouse gas emissions.

When the AEP project was conceived, it appeared as though national policymakers would soon limit the amount of carbon dioxide power companies could emit.

That would have made a carbon capture system valuable — and perhaps necessary for AEP. Coal-fired plants account for two-thirds of the company's generating capacity. Coal produces twice the carbon dioxide as natural gas, while nuclear power generation produces no carbon dioxide.

But Congressional efforts to limit or tax carbon dioxide failed last summer, and were all but abandoned after Republicans took control of the House of Representatives.

"We are clearly in a classic 'which comes first?' situation," Morris said, explaining that while the technology was vital for complying with potential future climate regulations, it was difficult to recover costs without federal requirements to reduce greenhouse gas emissions in place. He said AEP found it difficult to attract partners to the project.

The system was expected to begin commercial operation in 2015 and would have captured about 1.5 million metric tons of carbon dioxide emitted from the plant each year and stored it about 1.5 miles below the surface.

Energy Department officials in Washington did not immediately return messages for comment on Thursday.

Carbon-dioxide regulation may still be coming, however. A 2007 decision by the U.S. Supreme Court gave EPA the authority to regulate greenhouse gases under the Clean Air Act. The EPA is expected to propose greenhouse gas rules this year. Democrats, Republicans, industry leaders and even the EPA all agree separate legislation would be preferable.

AEP said it was terminating its cooperative agreement with the U.S. Department of Energy, which chose AEP two years ago to receive up to $334 million in funding to cover part of the costs of the project. A first phase, involving front-end engineering and design and the development of an environmental impact statement, would be completed but the project would not move forward from there, AEP said.

The government's tab for the first phase was expected to be about $16 million, the company said.

AEP, based in Columbus, Ohio, is one of the nation's largest electric utilities. It serves 5.2 million customers in 11 states and has 80 power plants.

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Associated Press Energy Writer Jonathan Fahey contributed to this story from New York.